Barnett (pictured) has already taken on Woodford’s role as head of UK equities, was yesterday appointed to manage the Edinburgh Investment Trust, and is taking over on the Invesco Perpetual Income and High Income funds in April.
Some commentators are concerned that the manager is taking on too much, but Barnett says that the team behind him means this is not an issue, while the similarities between the portfolios will also help. The manager also says that he is unconcerned by the prospect of taking on such a large sum of money: even after the recent outflows the IP Income and High Income funds contain more than £23bn.
“My current responsibilities will remain on the trusts and funds I run,” he said. “My style has always been to see myself as a long term investor and with large sums of money that’s reinforced. You can’t switch sums of money around so quickly.”
“The turnover of my funds historically has been low, and the long-term average holding period is four to five years. I would suggest strongly my approach and style lends itself to large sums of money.”
“The honest answer is I don’t know [how I will cope with the large funds], because I haven’t done it before. Ask me in a year’s time and I will be able to give you a better answer.”
“My belief is that my process is scalable to a larger sum, but I am not doing this on my own.”
Barnett manages the open-ended Invesco Perpetual UK Strategic Income fund as well as four investment trusts: Keystone, Perpetual Income and Growth, Invesco Perpetual Select UK Equity and, since yesterday, Edinburgh. He will also run Invesco Perpetual Income and High Income once Woodford departs.
Both his open and closed-ended funds have outperformed Woodford’s in recent years, which most commentators put down to their smaller size allowing them to hold more in the mid cap space.
Performance of funds over 3yrs
Source: FE Analytics
Barnett says he will not be adapting his style on the UK Strategic Income fund.
“Nothing is changing I will be managing it going forwards, in terms of process and approach nothing is changing,” he said.
The manager points out that the UK equity team at Invesco Perpetual is five-strong, two in the large cap space and three on small caps. The managers share ideas, research and analysis, meaning that he doesn’t have sole charge of so many funds.
Barnett explains that he is also backed up by a strong team of dealers who have helped as the open-ended funds have faced redemptions.
“At the moment the outflows are being handled by Neil [Woodford],” he said. “My stance will be to try in the same way he has to effect the changes in a way that’s unpredictable and anonymous.”
“You don’t want to make changes when the market can see you coming.”
Barnett says that he is using the redemptions to reshape the portfolio in the way he wants to.
“I have plans but reserve the right not to disclose at the moment,” he added.
Barnett took over management of the Edinburgh IT yesterday. His Perpetual Income and Growth trust has actually beaten the former over three years, too.
Performance of trusts versus index over 3yrs
Source: FE Analytics
The manager says that his approach to taking over the new portfolios is to move softly – “evolution rather than revolution”.
“I am looking at a lot of companies that I haven’t looked at before, particularly the unquoted ones,” he said.
“The portfolios I have been running are not drastically different from Neil’s fund. I am finding lots of stocks that I don’t own but we are not talking about wholesale changes.”
Barnett remains cautious on the prospects for UK equities this year, saying that investors shouldn’t expect gains as high as those seen last year.
Growth is likely to disappoint, too, the manager says, adding that he expects it to come in at 1.5 per cent this year from 1.7 per cent in 2013.
“The UK economy is doing OK,” he said. “Doing better than we thought it was going to do last year. It wasn’t even 12 months ago that we were worrying about a triple dip recession, but now we are talking about the fastest growth in the G7.”
“Let’s not get carried away. The growth rate reported yesterday was about as good as it’s going to get.”
“One, the banks aren’t really lending, which is critical in an economy such as ours. Credit creation is not growing and lending is not growing, and our economy is built on credit.”
“Two, business investment hasn’t picked up. Politicians are saying it’s about to happen but we are five years past the crisis.”
The third reason is we are yet to see wage growth after inflation, which is necessary to support the improving economy by giving consumers more money to spend, he explains.